Personal Finance (13): A Confession of a Public Fund Manager In China

Good day,

Attached, ---8<  Cut and Paste >8---- , is the last portion of an article by a public fund manager in China confessing why he can never beat he "super wealth transfer machine"(stock market system) and decided to quit his job.  And, after all, in his 10 years of career as fund manager, he already made more than 10million RMB as a salary despite losing money for his clients...  

The full article, in Chinese, can be read from the link attached:

---------------------------------------Cut and Paste---------------------------------------------
一个公募基金经理的忏悔书
我无法对抗这个制度、我彻底投降、我准备辞职，我对我管理的基金的投资者表示深深的忏悔!我真的无能为力在这个市场中帮助你们赚钱！
　　中国XX基金管理公司 XXX基金经理
　　（恕我在此不公布老东家的名字，毕竟服务多年，领取了千万元的薪水！）
--------------------------------End of Cut and Pate ---------------------------------------------
http://bbs.hexun.com/stock/post_5_5961685_1_d.html

Any way, here is a very very brief summary with the KEY FACTOR of why he can't win:

"The author, 10 years fund manager in China, described that the stock market is a wealth transfer machine.... Due to the fact that the fund managers, by Law and software system, must keep at least 60% of the money in the market. Even if the fund manager want to get out of the stock and keep cash when the market is clearly in down trend or even crashing, the software would not allow them to sell...."

Here are some points of ponder:

* FACT
Now, the above chart showng the China Shanghai and ShenZhen 300 index (SSE300).  There is clearly more down trend than up trend for the past 5 over years.  And, if one were not only can't short the market, but also must spend at least 60% of the fund to purchase stocks at any point of the time.  As a Public Fund Manager, how can they make money as the calculated probability seriously against them?

Anyway, this is  the rules and regultion for fund managers world-wide.  Imagine IF there is no such rule, what would happen, if most fund managers try to find exits for cash?


* OPPORTUNITY
Now, what would you do IF you are a fund manager under such rule?
The manager would at least want to beat the overall market index by selling the worse sectors/stocks and get a ride on the better sectors/stocks.

So, in order to sell 10% worth of weak stocks in his portfolio, the fund manager MUST FIRST purchase at least 10% of the equal value of stronger stocks before the software system allow him to sell the weak one.

This would result in lot of money rushing into relatively handful of sectors/stocks and result in sharp rally!

For Example:  Some Internet/Games companies are the current percieved "safe harbour" and the money is rushing in at this point of time:(QIHU,DATE,GAME,YY)

..the above are just a few, can include the famous BIDU (but the up side is may not be that great as high price stock generally move slower... but safer).


*CONCLUSION:
It is better off spend your resources (time and money) to learn and DIY.  The chances is very much higher. 

AND, off course... don't do this:  Dash into the market without going throuh a proper stock market training, withot going through adequate paper practice, and without a reliable trading system.  It is like the message from the following cartoon I found in facebook. :-)

Thank you for your time, and

Bless You
KH Tang


NOTE: THIS ARTICLE IS MERELY FOR AWARENESS ONLY!

The Man with the Mission of "Making You Rich"!? - Robert Kiyosaki

Robert Kiyosaki has been well known since his first best selling book "Rich Dad, Poor Dad", which
was published in 2001 (10 years ago). Yes, if you have not read the book, it is strongly recommended
to do so as it is really an inspiring book on personal finance.

Following by this inspirational "Get Rich" concept, multiple books had been published and become
best seller of the time. Especially on the Real Estate Investment Topics during the last US market
Housing Boom since 2003.

Click on the Chart to Zoom in for detail view of time frame

The above stock chart illustrates the Real Estate market in US since 2001 till now. Did he help to fuel 
the last Housing Bubble in the US and cause many investors run into heavy debt eventually, I don't 
know.  But, it just prove few simple facts.

1) Which is with the current society system setup, "NOT ALL PEOPLE CAN BE RICH ALL 
AT ONE TIME." This is true even no matter how hard that everyone is trying their best to read, to 
learn, and to work. See... What happen if all people getting rich and all want to get retire early? Who 
is going to drive the public transportation, who is going to clean the shopping mall, and so on...

2) Getting Rich requires a person to have a long term persistent effort and development on some 
Specialize Knowledges and Wisdoms, which can not be Duplicated like copy a file from one 
computer to another, by simply reading a book or attending a seminar would not get there immediately. 
Similarly, simply by working on a job created by someone else for you (unless you are top executives 
in big corporations which is rare) will not get you rich, nor get you to retirement comfortably in early
age.

Attached are few video clips that take the view from another angle of Robert Kiyosaki teaching. That 
is by holding few days workshop with large group of participants at 45,000 Canadian Dollar per 
person... 


Did you ask the Questions:
"WHO REALLY MAKES WHO RICH?"
"IS THE INTENTION ONLY TO HELP THE RICH TO GET RICHER?"








If you have trouble to see the video clips above, here are the link to youtube.

http://www.youtube.com/watch?v=HE6nT0oyPt8

http://www.youtube.com/watch?v=dv6feHB0AE4&NR=1
http://www.youtube.com/watch?v=9iimvyVCEGA&NR=1

Historically, getting less in number by now despite it has more population on earth ever, there are 

great teachers in many fields, such as spiritual, philosophy, medicine, etc... helping others to have a 

better live. I never heard that they went around helping other by charging them with big lump sum of 

money first. So, what lead human to behave as today? And, more importantly, with the trend going, 

what would be the future look like??? 

No man has a chance to enjoy permanent success

until he begins to look in a mirror for the

real cause of all his mistakes.

- Napoleon Hill

Trap for Investors (6) - The Best Trading System in the World for Sales

For anyone who has spent some time in the stock market, he/she must has come across some advertisements on selling of outstanding profitable trading system, courses, stock pick, etc. that promise to have your return of investment multiplied a couple of times in short period of time.

Now before we discuss on such advertisements, let me bring out a true story that happened in Niagara Falls:-

-------------------------------------------8<---------------------------------------------------

Back on June 30, 1859, a man by the name of Charles Blondin accomplished an amazing feat. He crossed Niagara Falls on a tightrope. About 5,000 people had turned out to see his performance as he had ran an ad in the New York Times earlier on.

The rope stretched 1,100 feet (nearly the length of 4 football fields) across the falls at a height of 160 feet (about 16 stories high).

Before Charles began his first attempt to cross the falls, he asked the crowd a question. “How many of you believe I can cross the falls on that tightrope?” The crowd just applauded and cheered to encourage him to start the performance. Charles not only safely made across and back on the tightrope, but also increased the difficult of the performance each time by pushing a wheelbarrow, on stilts and blindfolded.

As the crowd was so amazed with his skill, he then asked “How many of you believe that I can cross the Falls with somebody on my back?” The crowd applauded and cheered this man that they now believe in his ability to do so. Then Charles asked for a volunteer, “Who will volunteer?” The crowd was silent. He then pointed out one man standing nearby, “How about you?” The man replied, ”Hardly, you don’t think I am going to risk my life like that, do you?” and he turn away.

Next Charles pointed out another man, “And what about you?” The man replied, “I believe. In fact, I have no doubt at all.” The man then proceeded to climb on the back of Charles Blondin and they headed across the falls. The crowd waited breathlessly while they crossed and roared their approval once they completed the crossing. What they didn't know was that the man who crossed on Blondin's back was Harry Colcord, his manager.

You see Harry Colcord knew how good Charles Blondin was and fully trusted him. His faith was secure, as the object of his faith, Charles Blondin, was trustworthy and had proven himself so over the years.

Reference: An Illustration of Faith

-------------------------------------------8<---------------------------------------------------

Yes. This story is about the "Faith" that we have on "some one" or "some thing". And, let come back to think about "The Best Trading System in the World for Sales"...

If those people, who are selling their Best Trading System, have Faith in their own system that can Multiply on the users' investment in short period of time, why do they just want to sell it for a couple of hundreds or thousands dollar????

One should be aware that for any good system, when it become public, it loses its effectiveness.(<- click here for some back testing results for many popular indicators that are used by the public.) The profits from the stock market are not unlimited. The profits have to tie to the transacted volume. Take for example, some penny stocks can get double, triple or even more in a short time. But if one take into the consideration of actual transacted volume.... He will see that it is only able to feed some speculators, not the major public. That is when a big pool of people want to take the profits, they have to sell the stocks, which would lead to excess supply... and the profits may suddenly vanish if not become negative. :-)

So, are you going to be the volunteer to use the system that the designers themselves do not have the full faith on it?

Well, one will never find peace of mind by letting the financial market to erode their hard-earned money, nor allowing others to determine their job stability in a compnay. And yet one can not simply buy a good trading system to depend on... So, is there any solution to escape the rat race? What about develop your own? If it is to big of a task for one person, why not workout a Master Mind Team to handle a bigger task?

"Whatever the mind of man can conceive and believe,

the mind of man can achieve."

- Napoleon Hill

Trap for Investors (4) - Ponzi Scheme and it's Derivatives

Below is a good video clip that explains what is a Ponzi Scheme.











* Why some insurance company policies will eventually ended up like a Ponzi Scheme.


There were many insurance policies that promise certain amount of annual return at the policy mature date, usually a few tens of year from the beginning of the policy. In order to attract the customers, the return has to be attractive enough. Also to minus of all those big bonus for the executives and commission of the salesman, plus the tough economy time to make profits from the market. One of the KEY SOURCE of income would be the new comers to the pool.


To see how this kind of system would fail, one would need to examine the Population Pyramid attached below. (Click to Enlarge)

Population Pyramid (Click on the Chart to Enlarge)

Take for example, many well developed countries are now in the Stage 3 of the pyramid (Stationary) and in the progress of moving towards Stage 4 (Contracting). And, some countries are trying to solve the problem by importing younger workers through immigration policy. But, this could ended up worse when the world economy is not growing.


Therefore, there are many Ponzi Scheme Derivatives such as certain type of Life Insurance Policies, which include the US Social Security System.


The following are good video clips that explain the problem with the Population Pyramids in most developed countries.









* Why inflation is a MUST, in order to keep the current system running.


Around the world, there are many countries, including China, at this point are suffering pain for the Pension Scheme for the retired workforce. In general, a pension is an arrangement that provide the people with an income when they retire from their job till the day he/she leave this planet. Of course, we don't get to see this kind of offer nowadays, but it was popular, especially for civil servant, just about 40-50 years back ...


During that time, the medical is not so advanced and average life expectancy was around 65-70. While just after the WWII for not long, everywhere is booming, the economy grow rate was just taking off. And, currently, the average life expectancy has been increase to about 80 and still seems to moving up. Attached is a typical chart on life expectancy chart found from the web...

On the other hand, the growth of the economy in most developed countries are saturated. As also shown in the population pyramid chart, while more and more people are retiring, there is less and less new work force competing more and more aggressively in the competitive global market.


While the politicians want to be elected or re-elected, they must keep the promise on the Pension Scheme. Naturally, they would keep their promise to pay the retirees, but they would pay more to the workers who are still working on the jobs. While the economy is not growing, the only way is to Increase the Money Supply or so call Print More Money... When more money is flowing into the society while the productivity remain the same... It basically dilute the previous-earned money that keep in the bank.


So, eventually, those people depend on pension system on their retirement will find that their buying power are reducing year by year with respect to the inflation.




After all, keeping cash in the bank has many risk nowadays....
Such as bank go bankrupt or value of money get diluted for sure.
Therefore, learning how to grow the money is a wise thing to do.

If you don't see the document attached below, click on the link:->

The Future Can Be Predicted with Data...

"Wealth is the product of man's ability to think."

-Ayn Rand

Relevant Article:- On Population Pyramid

<<<<<<<<<<<<<<<<<<  NOTE ADDED ON 10 OCT 2012  >>>>>>>>>>>>>>>>>>>>>

The above article was posted immediately after I heard of GENNEVA GOLD investment scheme that can give 24% annual return on Capital.  

Now, it has became history.

 

 

Trap for Investors (3) - Too Big To Fail: Foreign Exchange (Forex) Market

Data from: http://www.mrainvestmentsllc.com/home/

Well, this is a known fact. Isn't it?

After the Nasdaq bubble, then by the Housing Bubble, followed by the Subprime Mortgage Crisis... What all US had done, and still doing it now, is to continue printing more money, and they call it stimulus and bailout.

So, we need not to be an economist to deduce that US Dollar is getting weaker and would continue so unless there is a change in the course of action.

Meanwhile, the people who hold on to cash in term of US Dollar would naturally doing their best to protect the value of their money by converting it into other "safer currency". Adding those traders and speculators encouraged by the financial houses... It is leading to another BIG BUBBLE, and it is already FORMED! That's hidden inside the Forex Market.

So, how Big is this Forex Market actually? Any idea?

Well...

Let's look that the short clip from his documentary,"Debt as Money II", Paul Grignon had a summary on that: " The transactions taken place in the Foreign Exchange Market in one week EXCEED the total value of the World Trade for Real Good & Services in the entire year."

(start from 3:11 -> 3:50)

While Forex is a HIGH LEVERAGE vehicle, some brokerage houses margin offer up to "400-to-1" or "100 to 1"!

When the public been seeing the trend of US Dollar continue for years to become weaken, they would want move their US Dollar to something else. EURO seems to be an Excellent choice, as it be trending up and up for years.

Did you ever ask that IF the Public is Right that the US Dollar is continuing to get weaker week by week, and month by month for another sure period of time, let say one year or two as suggested by some Gurus who sold newsletters...

Where are they got to claim their profit from???

So, when it come to a time that the statistics indicate most of the public money had already been sucked into Forex Market and BET on the EURO Win Over US Dollar... Something MUST HAPPEN...

So, now we have Greece Financial Crisis surface up....

Possibly follow by Portugal, and even possibly follow by Spain...

This would Create a FEAR for people to hold onto the EURO.

It will come to a point, like a crowd in a building that suddenly caught big fire everywhere, all people want to rush for the small exit all at one time, many would be burned.  And, it could collapse the EURO in a very short period of time.

Is this yet another unpredicted event?

Actually, we are all co-creating the event.

We can choose to follow or not to follow.

"When masses of people succumb to an idea, they often

run off at a tangent because of their emotion."

- Humphrey B. Neill

(The art of Contrary Thinking)

The New Economy

Someone had forwarded me a hilarious story to illustrate how the US Economy works today:-

--------------------------------------------8<-------------------------------------

It is a slow day in the east Texas town of Longview. It is raining, and the little town looks totally deserted.

Times are tough, everybody is in debt and everybody lives on credit.

On this particular day, a rich tourist from the East is driving through town.

He enters the only hotel in the sleepy town and lays a hundred dollar bill on the desk stating he wants to inspect the rooms upstairs in order to pick one to spend the night.

As soon as the man walks up the stairs, the hotel proprietor takes the hundred dollar bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to pay his debt to the pig farmer.

The pig farmer then takes the $100 and heads off to pay his debt to the supplier of feed and fuel.

The guy at the farmer's co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has lately had to offer her "services" on credit.

The hooker runs to the hotel and pays off her debt with the $100 to the hotel proprietor, paying for the rooms that she had rented when she brought clients to that establishment. The hotel proprietor then lays the $100 bill back on the counter so the rich traveler will not suspect anything.

At that moment, the traveler from the East walks back down the stairs after inspecting the rooms.

He picks up the $100 bill and states that the rooms are not satisfactory, pockets the money and walks out the door and leaves town.

No one earned anything. However the whole town is now out of debt and looks to the future with a lot of optimism.

That, ladies and gentlemen, is how the United States Government is conducting business today.

What do you think....

(Author Unknown)

---------------------------------------8<-------------------------------------

Now...

One might think that though the story is interesting, but how does it related to the real world?

See...

The rich tourist is the FED, it printed the money and circulate it around and eventually goes back to him through various methods... Such as all kind of taxes that you already known, plus the invisible one-->the inflation. “Inflation is taxation without legislation.”--Milton Friedman.

And after that what happen?

There will be $100 more in the Money System.

When the FED keep doing this, they will be more and more money in the system.

(As show in Picture one... Money Supply Keep Increasing in an exponential rate!)

While the products or services can not keep up with the rate of increase...

(As show in Picture two... Depletion of finite Natural Resources, such as energy, clean water, farm land,etc., keep reducing.)

=> The Buying Power of Money keep reducing or so called Hyper Inflation.

(As show in Picture tree... Relationship of Value of Dollar Vs Money Supply.)

In the attached videos, it explains clearing how this hyperinflation can and will happen, and using the Zimbabwe case as an example. It also provides some suggestion as a solution for individual in how to deal with it... Must Watch...

By the way, the rich tourist here can be your government too. :-)

Why not take a minute to google and find out how much "Money Supply" is produce by your rich tourist last quarter?

Bless You.

KH Tang

"Inflation is always and everywhere a monetary phenomenon.

To control inflation, you need to control

the money supply."

Milton Friedman,

Nobel Laureate in Economics.

Who Gain the Profits from Financial Crisis?

Attached is a short article that tell people How and Who will gain huge profit

from financial crisis. Although it was written in the 80's...

-------------------------------------------------- 8< -------------------------------------------------------

Excerpt from "Syndrome of Control" - Chapter 1 by Lindsey Williams

--------------------------------------------------------------------------------------------------------------

Farms
One-tenth of one percent of the farms in America are going into bankruptcy every thirty days. Recently, a farmer in South Dakota told me the following story. He said that his farm had been in their family for three generations. His great, great grandfather had homesteaded it. It has been successfully and profitably tended for three generations.

A few years back when land values increased considerably, the bank persuaded the farmer to purchase more land and equipment by borrowing from the bank, using his land as collateral. Then the bottom dropped out of land prices because of the economy which had been intentionally manipulated by the Internationalist. The bank came to the farmer and said that because land prices had fallen, he no longer had enough collateral to cover his loan, and even though he was current in his payments, he must pay the difference between the amount of his loan and the amount of collateral which he had to back the loan. The farmer could not come up with the amount of money the bank was demanding. Later the bank came to the farmer and announced that they were going to repossess, but the bank asked the farmer if he and his family would stay on the farm as Tenant Farmers.

Was it to the advantage of the Internationalist to bring about a financial crisis for the farmers? Yes! They got the farm for the price of the combine. If a farmer can't afford to farm without borrowing money, then he surely can't afford to farm borrowing money and paying interest. I predict that the majority of the farms of America will be corporate farms within a few years, if the Internationalists have their way.

-------------------------------------------------- 8< -------------------------------------------------------

This trick had been applied world wide... and it is now applied to all the oil production countries... and still working well. History keep repeating itself. Just that the scale and location keep changing.

As spoken in the 1st video that the Manipulator will only buy stocks at it lowest price by spending penny for value of dollars. How can this be done? Or, how can this be detected? This article, TAPE READING, would show you the clue of how to do so.

"The average man doesn’t wish to be told that it is a bull or a

bear market. What he desires is to be told specifically

which particular stock to buy or sell. He wants to

get something for nothing. He does not wish to

work. He doesn’t even wish to have to think."

--Jesse Livermore

Some Events that Create Waves in the Market

The market behavior is so strange that it mostly go the “Wrong” direction as perceived by the public. And, that cause most public, (90%), continues to lose money in feeding the financial system.

Here are two simple terms which might be interested for some, in order to know a little more why would the market often goes the different direction with their researches.

1) Triple Witching

2) Window Dressing

In the derivative market, such as option and future, when one person is making some profits, some others got to lose the money to him.

Imagine that when the market is so bearish that everyone would believe that it would continue to go down… What most public will do is to buy the “PUT” Option, which it can use margin to leverage for high benefit from the market. So… Imagine that all the public is right; this would drive the option writers, mostly by financial institutions, to have big losses or even drive them to bankrupt with a few consecutive rounds of "strike" in the targeted price.

Now, imagine that you are the financial institution, what strategies or action you are going to take???

Of course, you would want to make sure you are the one who win, and that is the whole purpose for selling the option. You would then do whatever necessary possible to ensure that the option would not strike within the expiration date! (It is up to you to imagine what necessary action it might be…)

So this create pullback from the trending market and create waves…

What Does Triple Witching Mean?
An event that occurs when the contracts for stock index futures, stock index options and stock options all expire on the same day. Triple witching days happen four times a year on the third Friday of March, June, September and December.

The impact of "triple witching" has been associated with increases in the volatility of the market. The increased volatility increases the uncertainty about prices of the underlying stocks. This phenomenon is sometimes referred to as "freaky Friday".

And, if one would to examine the market behavior around these period, it can usually find serious pullback just before these dates.

What Does Window Dressing Mean?

Performance reports and a list of the holdings in a mutual fund are usually sent to clients every quarter. To window dress, the fund manager will sell stocks with large losses and purchase high flying stocks near the end of the quarter. These securities are then reported as part of the fund's holdings.

Another variation of window dressing is investing in stocks that don't meet the style of the mutual fund. For example, a precious metals fund might invest in stocks that are in a hot sector at the time, disguising the fund's holdings, so clients really have no idea what they are paying for.

Window dressing may make a fund appear more attractive, and it can't hide poor performance for long. But, the trick is that most public do have faith with their fund managers, and hope that they are doing all the best to protect their interest as they paid the fund managers to do so... Well, things are getting more complicated in modern society, and HOPING is definitely not a good strategy...

Bless You,
KH Tang

"It is better to be out of the market for a week or

a month than to make one wrong trade.

Stay out and your judgement

will clarify"

-Richard D. Wyckoff

How does the Media Control Viewer's Thinking...

It is a norm that many people watching the TV for the whole evening, and others may just letting it on for the whole day as long as they are awake.

Mind Influence/Control with subliminal messages:

Here is a short video that demonstrates how the environment can influence and even control a person thinking through subliminal messages. These messages are designed in such a way that it appears to be so insignificant to the conscious mind on the surface. And, when it comes to making the decision, the subconscious mind will automatically pop-up these messages and do certain thing. Such as spending money on unnecessary stuffs, investing in the wrong recommendation, etc...

That's how the advertisement industry works; that's how the financial news works. The subliminal messages basically sending embedded command to the viewers' subconscious mind.

The best shield against these subliminal messages is to avoid them. So, it is good idea not to watch too much TV program. :-)

And... It is not what we do once in a while that counts, but our consistent actions...
Switching off the TV program for a few days would not see the result, while switching it off for a few years make a big difference... Think of the amount of time can be saved and put it into better use. :-)

"Successful people have libraries.

The rest have big screen TVs."

— Jim Rohn

Subliminal Messages Everywhere

Trap for Investors (2) - 暗渡陈仓

continue from...

Traps for Investors (Part 1)

One of the mostly used trap to trick the investors is called 暗渡陈仓. Basically, it means to deceive the enemy with an obvious approach that will take a very long time, while surprising him by taking a shortcut and sneak up to him. As the enemy concentrates on the decoy, he will miss you sneaking up to him.

Here is how it normally work in the stock market:--

When the news talk about the market direction, it usually reports on a few indices...
Such as the Dow Jones Industrial Index, Nikkei 225, Hang Seng Index etc...

And, in actual fact, these Major indices are representing very very minor number of stocks in their respective market...

For example, Dow Jones Industrial consist of only 30 stocks out of a few thousands stock in the US market, and usually those key indices normally consist of higher price stocks.

So, when the manipulators would like to distribute their stocks at the high price, especially the poor quality and low price stocks... They can focus in pushing up some index stocks and with the help of the media to broadcast that the market is keep moving up... While some untrained public would prefer to buy some lower price stocks for what ever reasons... Then they would fall into the traps...

That's why some time people may wonder, why the market keep moving up while the stocks that they owned does not move. It need to look into more details... such as which sector is now moving up or down, what kind of capitalization (Large, Mid, or Small) stocks is leading, etc...

Most people heard of the phrase that "Knowledge is Power". The fact

is that Knowledge isn't power, it is just a potential power.

IMPLEMENTATION of knowledge is the POWER.

- Unknown